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  • Tidal Report – 17 Apr 2010 – China on a Treadmill to Hell : third wave group
    makes combined US 7 000 or US 8 000 a year Now you do the math Incomes are about US 3 500 per capita in China urban areas slightly higher Even if they were making US 10 000 to US 15 000 a year you couldn t carry a US 150 000 condo This is very similar to someone making US 40 000 in the US at the height of our bubble and buying an US 800 000 house And we know how that ended While many commentators agree that property is running hot very few are concerned It is almost universally felt that because China is a command economy the Chinese Government will be able to prevent the sort of fallout that has been seen in Western democracies Jim Chanos begs to differ Well they ve already begun to take some steps We re seeing what we call jawboning some attempts to talk the market down That s not having much of an affect according to the prices we ve seen in February and March They ve also begun to take some steps such as requiring higher down payments for second homes And so we re seeing some things on the margin This week the Chinese Government proudly announced that GDP had grown 11 9 per cent from a year earlier According to Chanos this stupendous GDP growth whether real or not is part of the bubble phenomena because in China it s all about making the number But the fact of the matter is the game has to keep going They re on this treadmill to hell as I call it because so much of their GDP growth is construction 50 to 60 per cent of this country s GDP is construction We ve not seen that in terms of a major country I think for a long time if not at all And so for them to get off of stopping construction you ll see GDP growth go negative very quickly That s not going to happen because in China it s all about making the number People are rewarded at almost every level of government for making their economic growth numbers The easiest way to do that is put up another building So they re really hooked on this sort of heroin of real estate development to keep the numbers going It s not infrastructure It s not airports high speed rail There s some of that And it s not exports Exports have been stagnant now for a while And it s not the consumer in China either despite what people believe It is construction real estate construction Chanos realises there are many unknowns particularly with respect to the potential actions the Chinese Government may take to cool down the property market He does however envisage the traditional supply demand dynamic playing out no matter what actions are taken Well it will run its own course no matter what because of course you now have

    Original URL path: http://www.thirdwavegroup.com.au/tidal-report/tidal-report-17-apr-2010-china-on-a-treadmill-to-hell/ (2013-02-03)
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  • Video – Chanos Says China Property Bubble May Burst: Charlie Rose : third wave group
    for Australia Earlier this week he did an interview with Charlie Rose that is a must view for anyone wanting to understand the astonishing imbalances present in the Chinese economy and how vulnerable are Australia s economic fortunes The following video is a Bloomberg excerpt here is the full interview on the Charlie Rose website Category general posts Tags china jim chanos real estate Leave A Comment Click here to cancel reply Name required Mail will not be published required Website subscribe Have our blog posts delivered straight to your inbox categories general posts tidal reports latest posts The story silver tells Is the end game in sight for Greece Descending the Slope of Hope Australia s sugar daddy stalling What housing undersupply Australian banks vulnerable still Chicken or egg the unemployment effect The recovery that isn t McKibbin you ve done it again What does this chart tell you tag cloud alan kohler australia banks ben bernanke britain china commodities currency debt deflation deleveraging demographia report economy employment europe first home owners global financial crisis great depression greece interest rates international monetary fund ireland japan jim chanos karl denninger kevin rudd leith van onselen louis christopher market history mike

    Original URL path: http://www.thirdwavegroup.com.au/general/video-chanos-says-china-property-bubble-may-burst-charlie-rose/ (2013-02-03)
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  • Tidal Report – 10 Apr 2010 – Sovereign Debt – Crisis? : third wave group
    While this rise in government debt is by itself worrying official debt figures are very misleading as they fail to take into account the contingent liabilities pension obligations and future higher spending related to an aging population The report explains the current expansionary fiscal policy has coincided with rising and largely unfunded age related spending pension and health care costs Driven by the countries demographic profiles the ratio of old age population to working age population is projected to rise sharply Rapidly aging populations present a number of countries with the prospect of enormous future costs that are not wholly recognised in current budget projections The size of these future obligations is anybody s guess As an example the US s debt level is currently around 70 per cent of GDP however Forbes magazine noted that if the unfunded portion of entitlement programs were included debt levels are more like 840 per cent of GDP an astronomical difference Additionally the risks have been made less obvious due to low interest rates and low inflation which makes financing and refinancing debts considerably easier These benign conditions are already showing signs of change with real inflation adjusted interest rates starting to increase Despite the high levels of public debt yields on most governments bonds have remained relatively low with the exception of countries like Greece The BIS report states this investor confidence is misplaced warning that the risk of an abrupt rise in government bond yields is very real Bond traders are notoriously short sighted assuming they can get out before the storm hits their time horizons are days and weeks not months and decades We take a longer and less benign view of current developments The question is when markets will start putting pressure on governments not if When will investors start demanding a much higher compensation for holding increasingly large amounts of public debt In some countries unstable debt dynamics in which higher debt levels lead to higher interest rates which then lead to even higher debt levels are already clearly on the horizon Government s now find themselves between a rock and a hard place Ambrose Evans Pritchard International Business Editor for the Telegraph in the UK summarised it thus The BIS said the usual cure for budget deficits is a return to robust grown and lower nominal rates Neither are likely for OECD economies this time The West has slipped to a lower growth trajectory Historical data shows that once public debts near 100pc of GDP they act as a ball and chain on wealth creation If countries do not retrench quickly they will create a market fear of monetization that becomes self fulfilling Monetary policy may ultimately become impotent to control inflation regardless of the fighting credentials of the central bank it said Some states may be tempted to carry out a creeping default by stoking inflation The payoff to do this rises the bigger the debt the longer its average maturity the bigger the fraction held

    Original URL path: http://www.thirdwavegroup.com.au/tidal-report/tidal-report-10-apr-2010-sovereign-debt-crisis/ (2013-02-03)
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  • Article – ‘Peak debt’ approaching as house prices outstrip incomes : third wave group
    peak debt according to a senior partner in one of the world s biggest management consultancies The full article can be found here Peak debt approaching as house prices outstrip incomes Category general posts Tags australia debt real estate stephen long Leave A Comment Click here to cancel reply Name required Mail will not be published required Website subscribe Have our blog posts delivered straight to your inbox categories general posts tidal reports latest posts The story silver tells Is the end game in sight for Greece Descending the Slope of Hope Australia s sugar daddy stalling What housing undersupply Australian banks vulnerable still Chicken or egg the unemployment effect The recovery that isn t McKibbin you ve done it again What does this chart tell you tag cloud alan kohler australia banks ben bernanke britain china commodities currency debt deflation deleveraging demographia report economy employment europe first home owners global financial crisis great depression greece interest rates international monetary fund ireland japan jim chanos karl denninger kevin rudd leith van onselen louis christopher market history mike shedlock oecd psychology real estate recession robert prechter sentiment sovereign debt steve keen stimulus stockmarket super profits tax technical analysis terry mccrann undersupply

    Original URL path: http://www.thirdwavegroup.com.au/general/article-peak-debt-approaching-as-house-prices-outstrip-incomes/ (2013-02-03)
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  • Tidal Report – 27 Mar 2010 – Housing Spin : third wave group
    lonely We seem to have discussed the real estate market a lot recently Constant commentary on the Australian housing market is not the aim of the Tidal Report and indeed there was no intention to comment further this week It does seem to attract however a significant degree of interest from our readers and several interesting snippets came our way through the week We received a fascinating email from a regular reader who kindly shared their recent on the ground experiences It shows a picture of the real estate market not often discussed in the media Parents with children have this sixth sense When the kids are too quiet you know something is up The residential property market reflects that everyone seems to be doing one of two things at the moment 1 waiting for something to happen or 2 waiting for something not to happen This fence sitting behaviour is artificially pushing the market and this is being construed by property market commentators as positive market growth I believe a close look at a market like the Gold Coast or the commercial property market generally will give a true reflection of the state of affairs which could exist in the property market in Australia if bad things come to pass Property values in these markets have retreated there is no doubt some as much as 50 per cent from past highs Looking at property advertising for sales in Brisbane it is common to see descriptions such as will suit buyers above an amount and buy before its too late Less than 70 km away on the Gold Coast many properties are peddled with pitches such as looking for buyers under an amount owners want offers make no mistake we will sell for what we can get and this property must sell Competition is fierce and this has driven prices lower In Brisbane and other capital cities my view is that there is bugger all out there and people are fighting over it One bizarre and confusing feature for me which is a contradiction of sorts I have witnessed recently over the last few months Auctions in Brisbane have all been subdued affairs I have now been to over 25 auctions in the last 2 months and these are my perceptions 1 30 per cent clearance rates 2 some properties have had no bids at all 3 most properties are not reaching reserve and 4 vendor bids being used to suggest higher pass in values This suggests some caution in buying activity To this extent perhaps the giddy days of the recent property rallies are behind us People will not bid in a frenzy of activity given tighter lending restrictions and lower LVR levels We also came across the following terrific article incorrectly dated April 2008 should read March 2010 which supports the notion that it is possible to write about the real estate industry in a way that doesn t involve telling people they need to get in now

    Original URL path: http://www.thirdwavegroup.com.au/tidal-report/tidal-report-27-mar-2010-housing-spin/ (2013-02-03)
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  • Article – Frayed String for China’s Property Balloon : third wave group
    for first time homebuyers the discount has been abolished and down payment requirement raised to 40 per cent for second time homebuyers and rates are at banker discretion while the required down payment has been raised to 60 per cent for third time buyers The full article can be found here Frayed String for China s Property Balloon Category general posts Tags andy xie china real estate Leave A Comment Click here to cancel reply Name required Mail will not be published required Website subscribe Have our blog posts delivered straight to your inbox categories general posts tidal reports latest posts The story silver tells Is the end game in sight for Greece Descending the Slope of Hope Australia s sugar daddy stalling What housing undersupply Australian banks vulnerable still Chicken or egg the unemployment effect The recovery that isn t McKibbin you ve done it again What does this chart tell you tag cloud alan kohler australia banks ben bernanke britain china commodities currency debt deflation deleveraging demographia report economy employment europe first home owners global financial crisis great depression greece interest rates international monetary fund ireland japan jim chanos karl denninger kevin rudd leith van onselen louis christopher

    Original URL path: http://www.thirdwavegroup.com.au/general/article-frayed-string-for-chinas-property-balloon/ (2013-02-03)
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  • Tidal Report – 20 Mar 2010 – The Myth of Undersupply : third wave group
    as a bubble bursting and become a glut Interestingly enough it seems that during a house price bubble almost everyone from the media to the government to the people believe that it is due to a fundamental lack of houses So does Australia actually have structural undersupply or is it a typical price bubble illusion The undersupply argument has its basis in the National Housing Supply Council State of Supply Report commissioned by the Australian Government This report concluded there would be a cumulative gap by 2028 of 431 000 dwellings Annually the shortfall is projected to be 23 000 dwellings in 2010 rising each year by a similar amount until 2016 when the size of the annual gap decreases consistent with an ageing population Although this report is widely quoted there are huge deficiencies in its basic assumptions which includes disregarding the 10 per cent or 830 000 houses that are vacant The conclusion it reaches also directly contradicts Australian Bureau of Statistics data According to the Australian Bureau of Statistics The past 100 years have seen a massive increase in the Australian housing stock In the period from 1911 to 1996 there was a fourfold increase in the Australian population from 4 5 million to 17 9 million The housing stock did not just keep up with this rapid rate of population increase it increased at almost double the rate This trend continued after 1996 with a 13 per cent population growth between 1996 and 2006 and a 17 per cent increase in dwellings Where is the undersupply in that data The most disturbing analysis comes from research done by Bubblepedia after posing the following questions So how do we know if we actually have enough houses for everyone Did every country around the world seeing record high real estate prices just not build enough houses How come the US thought they had a shortage but then when the artificial demand from the housing bubble disappeared they suddenly had a glut Is this likely to happen elsewhere How can we tell Population and dwelling data from 2001 to 2006 were compared between the US and Australia The rate of increase in the number of dwellings in the US exceeded the rate of growth in the number of people by 44 per cent compared to 41 per cent in Australia Additionally it was found that Australia had an increase in the number of vacant houses 2 7 times population growth Where is the undersupply Bubblepedia then looked at the Australian data from the perspective of household size Australia has built 1 6 dwellings per new person over the last 20 years despite having an average household size of 2 6 people per household When the 2001 to 2006 data were analysed it was found that the household formation compared to additional dwelling units constructed gave only a small rise in the number of adults per occupied dwelling between 2001 and 2006 Where is the undersupply In point of fact

    Original URL path: http://www.thirdwavegroup.com.au/tidal-report/tidal-report-20-mar-2010-the-myth-of-undersupply/ (2013-02-03)
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  • Video – Ratigan Explains Lehman Report : third wave group
    undersupply Australian banks vulnerable still Chicken or egg the unemployment effect The recovery that isn t McKibbin you ve done it again What does this chart tell you tag cloud alan kohler australia banks ben bernanke britain china commodities currency debt deflation deleveraging demographia report economy employment europe first home owners global financial crisis great depression greece interest rates international monetary fund ireland japan jim chanos karl denninger kevin rudd

    Original URL path: http://www.thirdwavegroup.com.au/general/video-ratigan-explains-lehman-report/ (2013-02-03)
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